Losses - Income tax vs Class 4 NIC

It is often overlooked that when trading losses are relieved against sources of income other than trading income, or indeed capital gains, this will cause a mismatch between the amount of losses carried forward for income tax and class 4 national insurance purposes.

Where losses are claimed under ITA 2007, s64 or s74 and/or extended by a claim under TCGA 1992, s261B, separate memoranda should be kept of the unutilised losses for income tax and class 4 NIC purposes as the amount of losses available for income tax relief under ITA 2007,s83  and for Class 4 NIC under SSBCA 1992, Sch 2, Para 3(3)(4)  will differ. See HMRC Manuals NIM24610 .

NB: It is also worth noting that same principle applies, but in reverse, where a taxpayer makes a claim for employment losses against general income under ITA 2007, s128  and these are relieved wholly or partially against trading income (which may also be extended to include set off against capital gains under TCGA 1992, s261B).

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